Budgeting for a Self-Employed IVA
The key to success with any kind of debt solution is to be able to stick consistently to a budget. This is perhaps most important when it comes to IVAs for people who are self-employed. Since profits can fluctuate from month to month, it is important to think about contingency plans in a much more concrete way than someone with a regular salary would. Below we explore some tips and strategies to stick to your budget, manage your IVA payments, and continue to run a dynamic and successful business.
- Allow Plenty of Flexibility
All budgets need flexibility in order to function, and this is particularly vital when your monthly income is not one hundred percent predictable. Some budgeting advice might suggest that you find a ‘job’ for every penny, but when working as a sole trader, leaving plenty of wiggle room might be a better idea. You could even consider planning a couple of different budgets for the same month, and making use of the one which best fits your circumstances as they emerge. It is important to remember that you will probably have to adjust your budget a few times to make it balance, and this can only be done through experience. Operating with limited access to credit can make a big difference to how you budget, which of course can be a real challenge, so it is important to allow yourself time to adjust. If you find operating your business impossible within the framework of your new budget, speak to the Insolvency Practitioner (IP) handling your case as soon as possible to arrange revised payments.
- Set aside an Emergency Fund
This is another budgeting basic, but one which definitely bears repeating. It is a good idea to set aside a certain amount of money for your emergency fund each month. Even if this is a relatively small amount, like £20, it is still worth setting aside in the long-term. This fund should be used when an emergency expense appears – either through your business or personal life. Having some money set aside means that you will not have to resort to credit – or at least will be able to borrow less than you otherwise would – to deal with the expense. Emergency funds are an essential part of any budget.
- Keep your IP in the Loop
If you do encounter an expense you feel unable to pay given your IVA contributions, it is best to tell your IP, because you will probably be allowed to take a break from payments. Additionally, you should also let your IP know as soon as possible about any significant, changes to your financial circumstances. If you find your monthly profits significantly increasing or decreasing, you will probably have to revise your IVA payments to reflect this.
- Seek lower cost Alternatives where you can
If you have had trouble keeping on top of credit in the past, an IVA may be the perfect chance to find ways to run your business on a lower budget. How you cut costs will depend considerably on what kind of business you run, but taking the time to shop around for the best deals with suppliers and services can be time well spent, and ease the strain on your budget. This could involve switching to a lower cost mobile contract, energy supplier, or website provider, as well as many other changes. Shopping around regularly and asking whether you could have a cheaper deal are well worth the time investment.
- Use free Resources
Where possible, switch to cost-free alternatives. For example, if you find you can no longer afford to include the upkeep of a website in your budget, make use of free-to-use social media such as Facebook, Twitter, and Instagram. Sharing content through your network could actually end up reaching more people if handled well. Encourage people to share their thoughts about your goods or services with their friends, or organise competitions to get people talking.
If you think an IVA might be right for you, but you would like more advice, you can speak to a friendly Creditfix advisor today on 0808 2085 198.